Debt recovery costs

Whilst the Users Guide makes interesting reading, it is the legislation that is paramount.

The Late Payment of Commercial Debts Regulations 2002 (SI2002/1674) states:
Once statutory interest begins to run in relation to a qualifying debt, the supplier shall be entitled to a fixed sum (in addition to the statutory interest on the debt).
That sum shall be —
for a debt less than £1,000, the sum of £40;
for a debt of £1,000 or more, but less than £10,000, the sum of £70;
for a debt of £10,000 or more, the sum of £100.
Source: [img]http://http://www.opsi.gov.uk/favicon.ico[/img] SI2002/1674

A debt becomes a qualifying debt when it becomes overdue. Each invoice (if issued on different dates) would become overdue on a different date, and interest would be payable from a different date. And so, I read that each different invoice would incur a seperate £40/£70/£100 charge as soon as the invoice became overdue.

Not sure how the legislation could be read otherwise.

Of course, this could be an area of negotiation between the parties, but the legislation seems clear to me.


Philip

It's back to that word 'reasonable' which makes this area of the legislation unclear. What is classed as 'reasonable' compensation?

If primary legislation sets the amount of the compensation, then I'm not sure why a Court would need to consider whether or not this amount is reasonable compensation.

Parliament (via a Statutory Instrument / Act of Parliament) has set the figure. Surely the role of the Court is to apply and interpret the law; not to decide whether it is reasonable.

I'd be interested to know if a Court has ever decided to reduce the value of compensation entitlement below that allowed by law, and the reasoning the Judge gave for this.


Philip

The issue I have is that we had a customer that was expecting payment on a couple of invoices that had not been paid within the agreed 30 day terms unfortunately due to them not being authorised in time by our branch, so they missed our payment run but was automatically put onto the following months run. They did not accept this so they withdrew our terms and stated that all invoices were now due on receipt. Some of the invoices had not even been received but they advised us they would start charging interest on them immediately. We therefore cancelled our contract and the company billed us for the remainder of the hire period on a number of vehicles. Instead of doing one consolidated invoice they sent us 12 invoices dated 19/7/10 and 4 invoices dated 16/7/10 they are all under £1000.00 and one invoice is for £1.67 but they propose to charge us £40.00 for each invoice as compensation charge because we have no terms and therefore overdue after one day. We have actually paid these yesterday but they still intend to charge us £40.00 for each invoice plus interest.

Your comments would be much appreciated, is it worth us defending this if they decide to take us to court?

I would like to add that I am in favour of the late payment act and have and still do use this, if necessary, when collecting debts, and only charge reasonable amounts of compensation. However, it is just that when I believe someone is using this law in appropriately then you need to speak out otherwise it is open to abuse and that does not help anyone.

To charge £40.00 for each invoice when the invoices were paid after 8 days from the invoice date, seems a little harsh and could have easily have been raised as one consolidated invoice and if need be charge one £40.00/£70.00.